2025 (10) TMI 191 - AT - Income Tax

Assessment under ss.143/144/254 quashed for total non-application of mind; defects fatal despite participation; s.292B inapplicable

Dakshin Damodar Rice Mill Private Limited. Versus ACIT, Cir-1, West Bengal

ITAT, Kolkata set aside and quashed the assessment framed under ss.143/144/254, finding total non-application of mind by the AO with material errors in ... Validity of the assessment order framed by the AO u/s 143/144/254 - second round before the Tribunal - HELD THAT:- On perusal of the corrigendum, it is revealed that there was total non-application of mind and casualness on the part of the AO in issuing notices in the set aside proceedings and the similar mistake has crept in the assessment order, notice initiating penalty proceedings and demand notice. In our opinion the said mistake is not curable u/s 292B of the Act even that the assessee has participated in the proceedings before the CIT (A) and the issue was not raised before the CIT(A). In our opinion, the defect in mentioning the financial year and assessment year in the notices and the assessment order is fatal to the proceedings and is not curable. Accordingly, we are inclined to quash the assessment framed by the ld. AO. Appeal of the assesseeis allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment order, demand notice and penalty notice are vitiated where the Assessing Officer repeatedly mentioned incorrect assessment year and previous/financial year in notices and the assessment order. 2. Whether such a mistake of wrongly mentioning assessment year/previous year amounts to a curable defect under the statute (section 292B of the Act) or is fatal to the proceedings. 3. Whether the assessee's participation in appellate proceedings without raising the wrong-year error results in waiver/estoppel barring challenge to the validity of the assessment and related notices. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of proceedings where assessment year/previous year were incorrectly stated Legal framework: An assessment, demand notice and penalty notice must correctly identify the assessment year and previous/financial year so as to give clear legal effect to the proceedings; notices and orders must be validly framed against the correct assessment year. Precedent Treatment: The Court examined the defect as to identification of assessment year in the context of set-aside/reauthorised proceedings and compared the nature of the error with precedents dealing with clerical mistakes and misdescription in notices (distinguishing curable clerical errors from substantive identity defects). Interpretation and reasoning: The Court found repeated, uniform misstatement of the assessment year and previous year across all notices, the assessment order, demand notice and penalty notice in the re-adjudication proceedings. The error was not a one-off clerical slip but a pervasive misidentification that demonstrably affected the subject-matter of the proceedings. The Court treated this as reflecting total non-application of mind by the Assessing Officer in the set-aside proceedings. Because the notices and order pertained, on their face, to a different assessment year, the affected documents failed to properly vest jurisdiction and notice in respect of the actual assessment year. The Court concluded that such defect goes to the root of the proceedings. Ratio vs. Obiter: The holding that pervasive, repeated misdescription of the assessment year/previous year in notices and orders is fatal to proceedings and renders them void is decisive (ratio) for facts of the case. Observations about the degree of negligence and the nature of the error are explanatory (obiter) insofar as they relate to standards of AO conduct generally. Conclusions: The Court concluded that the assessment order, demand notice and penalty notice were invalid and must be quashed because the documents incorrectly identified the assessment year and previous year in a manner fatal to the proceedings. Issue 2 - Curability of the defect under section 292B (curative provisions) or similar provisions Legal framework: Statutory provisions permitting correction of mistakes or curing certain defects (e.g., section 292B or equivalent curative provisions) are applicable to errors that do not affect the jurisdictional or substantive identity of the proceedings and where the essence of notice remains intact. Precedent Treatment: The Court considered the line of authority distinguishing clerical/typographical errors curable under curative provisions from substantive defects that cannot be cured because they alter the identity of the proceedings or impair the statutory requirements for issuance of notice. Interpretation and reasoning: The Court held that the incorrect reference to assessment year and previous year in all relevant documents was not a curable clerical mistake under the curative provision. The pervasive nature of the error meant the notices and order did not correctly relate to the relevant assessment year, and correction could not retrospectively validate the absence of proper notice and jurisdictional clarity at the time of issuance. The corrigendum issued by the AO post-facto was treated as insufficient to validate the prior defective proceedings. Ratio vs. Obiter: The conclusion that such non-curable defects cannot be cured under the curative provision is central to the decision (ratio) as applied to the present error. General comments about the scope of section 292B and examples of curable vs. non-curable errors constitute explanatory ratio and guidance for similar fact patterns (partly obiter where broader generalisation occurs). Conclusions: The defect was not curable; the corrigendum did not cure the fatal defect and therefore the assessment and associated notices could not be validated by post-issuance correction. Issue 3 - Effect of assessee's participation in appellate proceedings and failure to raise the year-error earlier Legal framework: Waiver/estoppel principles and the consequences of participation in proceedings without raising objections may bar subsequent challenges in some circumstances; however, jurisdictional defects and fundamental defects in notice may be open for challenge notwithstanding earlier participation. Precedent Treatment: The Court examined authorities distinguishing non-jurisdictional procedural objections (which may be waived) from jurisdictional or identity defects (which may be challenged at any stage). The Court relied on the principle that a defect going to jurisdiction or the validity of the notice cannot be cured by participation. Interpretation and reasoning: Although the assessee had participated in appellate proceedings and had not raised the error before the appellate authority, the Court held that participation did not estop the assessee from challenging a fundamental defect that rendered the proceedings void. The Court reasoned that once an error affects the foundational validity (correct identification of the assessment year) of the proceedings, the objection is not merely procedural but jurisdictional in nature and therefore not foreclosed by prior participation. Ratio vs. Obiter: The finding that participation does not validate proceedings suffering from jurisdictional defects is applied as a ratio in the judgment. Ancillary remarks about the prudence of raising objections earlier are obiter. Conclusions: The assessee's earlier participation and failure to raise the misdescription did not preclude the challenge; the court allowed the challenge and quashed the assessment and related notices. Cross-reference The determinations on curability (Issue 2) and waiver/estoppel (Issue 3) are interlinked: because the misdescription was held to be non-curable and jurisdictional in character (Issue 2), the assessee's participation could not validate the proceedings (Issue 3), leading to the outcome on Issue 1 (quashing of the impugned orders and notices). Disposition The Court quashed the assessment order, demand notice and penalty notice as being invalid for incorrectly and repeatedly stating the assessment year and previous year, a defect held fatal and not curable; participation in appellate process did not cure or bar the challenge to this jurisdictional defect.